LUT (Letter of Undertaking) for Export without payment of GST

LUT and bonds are instruments that evidence an undertaking by the taxpayer for exports. Here we give an insight into the details about when to opt for LUT and when to opt for Bond. Not only this but also how to claim the refund of IGST paid on exports in simple steps.

Background to Exports and GST

The motive of any developing economy's government is to expand its export base. The rationale for the same is to maintain the balance of payments, create job opportunities and boost economic growth. By providing certain benefits and reliefs on exports, the government promotes the trade. The exporters can avail these benefits and reliefs and thus undertake a free-flowing and beneficial trade. On the same note, the government provides certain benefits under the GST regime to exporters. There is no incidence of the tax (net effect) in a case where an exporter exports goods/services from India.

Under GST regime, the exporter has either of the two options:

  • Export under bond without payment of tax
  • Export along with tax payment and claim refund later

Brief on refund of IGST paid on Exports

Under GST laws, the exporter has the option to pay IGST on exports and then claim refund of the same. The process of claiming refund has been made easy for the export dealers. For export of goods or services or both, there is no need to file a refund application (GST RFD-01) separately.

The shipping bill filed by the exporter is a refund claim in itself. The exporter charges IGST on the invoice for export at the applicable rate (rates specified for different goods and services). On payment of IGST, the refund can be claimed for the following two elements:

  • Input tax credits on goods and services which remained unutilised;
  • IGST paid on export of goods or services.

The law specifies that shipping bill is to be considered as a refund claim on satisfying following two conditions.

  • The person carrying export goods should file an export manifest and
  • The applicant should have filed the returns in form GSTR-3B appropriately. A refund is initiated on filing table 6A in form GSTR-1.

On filing the above documents appropriately, the refund is processed by the department.

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